Virtual asset sector remains poorly regulated in many countries: Global watchdog

Sector at high risk of being exploited for money laundering, terrorism financing

- Andrew Wong

The virtual asset sector, which includes cryptocurrencies, is at high risk of being exploited for money laundering and terrorism financing activities, the Financial Action Task Force (FATF) said.

Speaking at the close of its plenary sessions in Singapore on June 28, FATF president T. Raja Kumar said the sector remains poorly regulated in many countries.

The global financial watchdog had issued global, binding standards to prevent the misuse of virtual assets for money laundering and terrorist financing.

However, about 75 per cent - or 97 of 130 countries with significant virtual asset and virtual asset service provider activities remain only partially or are not compliant with the standards.

FATF said gaps in the global regulatory system have created significant loopholes that can be exploited by criminals, terrorists and rogue regimes.

Said Mr Raja: "Countries urgently need to prevent further abuse by criminals on this sector. Many countries are acting too slow on this, but the reality is we can't allow terrorists to raise funds or organised crime groups to launder funds in an unregulated space." According to FATF standards, countries need to license or register virtual asset service providers and supervise the sector, in the same way they supervise other financial institutions.